10-year interest rates have also risen in countries such as Greece and Italy, and at the same time house prices continue to rise there too. “As if nothing happened,” says Mujagic. Both countries have high public debt, which is why, according to the economist, it is important to point out that in countries with low public debt, such as the Netherlands and Sweden, house prices are falling. “This year, the Greek economy will outpace the eurozone as a whole, and also the Dutch and Swedish economies.”
Government debt
According to Mujagic, we, but also Sweden, are much more affected by high interest rates than the aforementioned countries. He thinks economists, including himself, have focused too much on just the national debt. ‘Public debt is not equal to all debts. There is also household debt, corporate debt. From now on we just have to look at the sum of all those debts.’
“In terms of national debt, Holland is the Greece of private debt”
“If we do that,” says Mujagic, “then we see that what Greece is in terms of national debt, Holland is in terms of private debt.” The debt of Greek households and businesses is responsible for 120% of the economy. The same calculation for the Netherlands shows that debts occupy 250% of the economy. “Due to the many private debts, the Netherlands is very vulnerable to rising interest rates,” says Mujagic. He doesn’t expect interest rates to fall any time soon. “I think interest rates are too low rather than too high.”
No mortgage
High interest rates combined with high private debts mean that it is becoming more and more difficult for more and more people to take out a mortgage to buy a home. “And then you see house prices respond by going down.” As many people in the Netherlands and Sweden have mortgages, house prices are falling. And many Greeks don’t have a mortgage.’